CBOE delays open after system problems

Computer glitch?

CBOE Holdings Inc. delayed the open for trading on the Chicago Board Options Exchange after experiencing system problems.

The exchange, the biggest U.S. options market by volume, did not say when it expected to start, according to an e-mailed statement at 11:50 a.m. New York time. CBOE accounted for 25.3 percent of options trading this month, according to data compiled by Chicago-based Options Clearing Corp.

“We are doing zero business,” Greg Richards, who trades VIX and S&P 500 options as an institutional broker at Chicago- based PTR Inc. on the CBOE floor, said in an interview. “It is not good for the CBOE in a competitive atmosphere.”

The delay highlights the fragility of U.S. equity exchanges in a week when a false report of explosions at the White House briefly wiped out $136 billion from the S&P 500 in about two minutes. CBOE is the exclusive venue for options based on the Standard & Poor’s 500 Index and the so-called VIX gauge of volatility.

Gail Osten, a spokeswoman for the Chicago-based market operator, didn’t immediately return an email asking for a comment on the delays. CBOE shares added 0.3 percent to $36.56 at 11:55 a.m. in New York.

Bill Brodsky, chairman and chief executive officer of CBOE Holdings, and Ed Provost, chief business development officer, were not commenting on the outage as they gathered outside the Green Valley Ranch Resort & Spa in Las Vegas, Nevada where they are attending the annual Options Industry Conference. Provost is scheduled to speak at a panel debate at 1:10 pm New York time.

SEC Monitoring

“As is our practice, we are monitoring the situation,” said John Nester, a spokesman at the Securities and Exchange Commission.

CBOE Futures Exchange, C2 Options Exchange and CBOE Stock Exchange are operational, the company said. The company runs two options markets, a stock exchange and a futures bourse.

CBOE published its first notice about technical problems experienced by users trying to download products listed on its main trading venue and CBOE Futures Exchange at 8:18 a.m. New York time.

The exchange initially planned to start trading at 10:15 a.m., 45 minutes after it normally begins, and delayed that by five minutes. At 10:21 a.m. it canceled that plan. At 11:07 a.m., it said no opening time had been determined for the Chicago Board Options Exchange.

Computer Problems

CBOE had a computer problem that halted trading for about two and a half hours in February 2000. The exchange’s trading systems malfunctioned in November 2007 and disrupted trading for about an hour. A power failure also shut the exchange for 35 minutes in August 1999.

The second-largest of 11 U.S. options exchanges is the only place where options on the S&P 500, one of the most-active products, change hands. The next largest exchange is Nasdaq OMX PHLX, with 15.7 percent of volume. C2 represented 2.4 percent of total options trading this month.

“There is no alternative to VIX other than over the counter trading,” Mark Sebastian, director of education at Option Pit Mentoring in Chicago, said in an interview. “This makes hedging very difficult.”

An average of almost 165,000 VIX futures traded daily this year, the most since the contracts started in 2004 and 73 percent more than in 2012, according to data compiled by Bloomberg. A record 449,955 contracts changed hands April 15.

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